Question: 1. What steps should MGS have taken to help limit their promoter liability? 2. Isnt Branchs loss a risk of doing business? Why should MGS

1. What steps should MGS have taken to help limit their promoter liability?
2. Isn’t Branch’s loss a risk of doing business? Why should MGS be individually liable?

Branch agreed to provide $75,000 in short-term financing to three individuals, Mullineaux, Gefter, and Satsky (MGS), for purposes of starting up a venture called Stereo House in which the principals would profit by arranging parties in a luxury beach house in the Hamptons (Long Island, NY) and charging guests to attend these events. Branch entered into an agreement with MGS whereby they agreed that the yet-to-be-formed venture would pay back the money to Branch at an interest rate of 10% over four months. The venture was ultimately unsuccessful and Stereo House was unable to pay back the majority of loan.

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